China spot copper concentrate treatment charges surpassed $70/mt in the week of March 17 after smelter Shandong Xiangguang Group cut production and heavy offers for March-May loading shipments pushed up spot trade levels.
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The CIF China Clean Copper Concentrate treatment and refining charges were assessed at $73.40/mt and 7.34 cents/lb respectively March 17, up 23% from Jan. 3.
Market participants said Xiangguang has stopped copper production in March, which would result in 80,000-90,000 mt/month of copper concentrate flowing into the spot market. A Xiangguang company source did not comment when contacted by S&P Global Commodity Insights March 17.
The smelter has a production capacity of 400,000 mt/year and meets most of its concentrate demand through annual contracts with miners.
Market sentiment toward spot TCs started to increase March 11, with several on the water and prompt-loading shipments being offered.
Traders and producers also showed willingness to sell forward-loading shipments to book prices early.
In addition, a major Japanese smelter was heard to have production issues in March, and to have postponed some prompt-loading cargoes from suppliers to H2.
On the demand side, a few large Chinese smelters have maintenance planned over April-May, making them unable to receive prompt cargoes on inventory concerns.
"Financing costs would be too high if we have to store the raw materials for three months," a source at a large-sized smelter said.
Spot transactions were reported at $73-$75/mt during the week to March 17 for March, April and May loading super clean copper concentrates, bought by Chinese smelters.
"Everything is happening at the same time, so spot cargoes are under pressure," a trader said.
As market participants expect Xiangguang will not return to normal production in the near term, and amid no spot demand from ex-China markets, market sentiment remains bearish.
"Most smelters are well-stocked at the moment, there is hardly any demand for April and May loading cargoes," a trader said.
The spread between trader and smelter purchases also narrowed following shrinking copper futures backwardation, and traders were reluctant to take physical positions.
The differential between smelter and trader purchases normally stands at $10/mt in terms of TC, and was observed to have narrowed to around $3/mt.
A trade heard done at $71-$72/mt for April loading clean copper concentrate during the week to March 17, producer to trader.